Introduction to and Definition of Management Accounting
Introduction:
Today economic activities are complex and diverse. The market is wide and competition becomes cut-throat. Hence the mere ascertainment of cost is of little use, as provided by cost accounting. Besides, the modern management is interested in not only knowing the cost of production, but also in controlling the costs. It is possible only if the management is in a position to determine financial cost, managerial performance, planning etc., and this gave birth to “Management Accounting”. Hence, new techniques were invented to present the accounts periodically, not necessarily at the end of the year, before the management. Such accounts should be prepared in such a way that the results could be easily compared with the budgeted data and efforts be made to exercise control. Such new techniques were termed as “Management Accounting”.
Definitions:
There is no unanimity among the management accountants to define this subject. There are various definitions on the concept given by different experts. Some of them are:
“Any form of accounting which enables a business to be conducted more efficiently can be regarded as Management Accounting” – The Institute of Chartered Accountants of England and Wales.
“Management Accounting is the presentation of accounting information in such a way as to assist management in the creation of policy and in the day-to-day operations of an undertaking” – The Anglo American Council on Productivity Report.
“Management Accounting includes the methods and concepts necessary for effective planning, for choosing among alternative business performances” – The American Accounting Association.
Scope of Management Accounting:
The scope of Management Accounting is very wide. Some of the areas included within the ambit of Management Accounting are:
1. General Accounting (Financial accounting)
2. Cost Accounting
3. Budgeting and forecasting
4. Cost control procedure
5. Cost and statistics
6. Taxation
7. Methods and procedures
8. Audit
9. Office services
10. Legal Provisions
Functions of Management Accounting
1. Modification of data
2. Analysis and interpretation of data
3. Facilitating management control
4. Formulation of business budgets
5. Use of qualitative information and
6. Satisfaction of informational needs of various levels of management.
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